The 1996 welfare reform bill constitutes the greatest change in public policy toward poor families since the Great Depression. Sponsors believe that its work requirements and time limits on cash assistance will benefit children because their parents will have increased self-esteem and a daily regimen, leading to better parenting, and will provide better role models. Opponents claim that the new rules will hurt children because single parents will become more stressed as they attempt to combine child care and employment. We argue that no one can predict a priori which view is correct because past research on the effect of welfare on children has not focused sufficiently on these issues. A new study of the effects of the reforms on children is therefore necessary to understand the impact of this landmark legislation. In addition, such a study presents a scientific opportunity to extend our knowledge on the broader issue of the effects of parental time and money resources on child well-being. We propose to study the effects of welfare reform on children in 3 cities in different areas of the country: Boston, Chicago, and San Antonio over a four-year period. Our conceptual framework combines the economic household production model with perspectives drawn from the developmental psychology literature and is informed by insights from sociological and ethnographic research. We will interview annually for 4 years 2,800 families with children 0-4 or 10-14, half welfare recipients, half low-to-moderate income, non- welfare-dependent families. In year 3 we will add a 2nd cohort of 1,400 families. The interview will include an adult component and also direct assessments of children's health and well-being. For 800 of the families in cohort 1 with children 2-4, an embedded developmental study will obtain further information from primary caregivers, child care providers, and fathers or father figures. We will also conduct rigorous, in-depth ethnographic studies of a total of 170 families with children 2-4 in the 3 cities, divided among African Americans, Hispanics, and non-Hispanic whites, half of them receiving welfare and half of them non-welfare working-poor.